IN THE INCOME TAX APPELLATE TRIBUNAL
\nMUMBAI BENCH \u201cC\u201d, MUMBAI
\nBefore Shri G Manjunatha (ACCOUNTANT MEMBER)
\nAND
\nShri. Ravish Sood (JUDICIAL MEMBER)
\nITA No.3874\/Mum\/2015 – AY 2007-08
\nITA No.3875\/Mum\/2015 – AY 2008-09
\nITA No.3876\/Mum\/2015 – AY 2009-10
\nITA No.7120\/Mum\/2016 – AY 2011-12
\nPratibha Pipes & Structurals
\nLtd, C\/o Jayesh Sanghrajla &
\nCo, Chartered Accountants,
\nUnit No.405, Hind Rajasthan
\nCentre, D.S. Phalke Road,
\nDadar (E), Mumbai-400 014
\nPAN : AAACP4898A
\nvs DCIT, Cent.Cir. 17 & 28, Mumbai
\nAPPELLANT RESPONDEDNT
\nC.O. No.100\/Mum\/2018
\n(Arising out of ITA No.3874\/Mum\/2015)
\n(Assessment Year 2007-08)
\nC.O. No.101\/Mum\/2018
\n(Arising out of ITA No.3875\/Mum\/2015)
\n(Assessment Year 2008-09)
\nC.O. No.102\/Mum\/2018
\n(Arising out of ITA No.3876\/Mum\/2015)
\n(Assessment Year 2009-10)
\nC.O. No.254\/Mum\/2018
\n(Arising out of ITA No.7120\/Mum\/2016)
\n(Assessment Year 2011-12)
\nDCIT, Cent.Cir. 17 & 28,
\nMumbai.
\nvs Pratibha Pipes & Structurals Ltd, C\/o
\nJayesh Sanghrajla & Co, Chartered
\nAccountants, Unit No.405, Hind
\n2
\nPratibha Pipes & Structurals Ltd
\nRajasthan Centre, D.S. Phalke Road,
\nDadar (E), Mumbai-400 014
\nCROSS OBJECTOR RESPONDEDNT
\nAssessee by Shri Harshwardhabn Datar \/ Shri
\nMangar Shukla
\nRespondent by Shri Awungshi Gimson
\nDate of hearing 28-02-2019
\nDate of pronouncement 10 -04-2019
\nO R D E R
\nPer G Manjunatha, AM:
\nThis bunch of four appeals filed by the assessee and four cross
\nobjections filed by the revenue are directed against separate, but identical
\norders of CIT(A)-51, Mumbai dated 17-03-2016, 18-03-2016 and 12-08-2016
\nand they pertain to AYs 2007-08, 2008-09, 2009-10 and 2011-12. Since, facts
\nare identical and issues are common, for the sake of convenience, these
\nappeals were heard together and are disposed of by this consolidated order.
\n2. The assessee has, more or less raised common grounds of appeal in all
\nthe appeals. For the sake of brevity, grounds of appeal raised for AY 2007-08
\nare extracted below:-
\n\u201c1. On the given facts, circumstances and judicial pronouncements; Hon. CIT
\n(A) erred in confirming the action of the Ld. Assessing Officer on account of
\nbogus purchases of Rs. 43,14,0767- under the head business income; such
\naddition is bad in law and liable to be deleted.
\n2. Without prejudice to above; on the given facts, circumstances and judicial
\npronouncements; Hon. CIT(A) erred in confirming the action of the Ld.
\n3
\nPratibha Pipes & Structurals Ltd
\nAssessing Officer on account of bogus purchases of Rs. 43\u00bb14>O76\/- under
\nthe head business income; such addition is excessive and liable to be reduced.
\n3. On the given facts, circumstances and legal propositions; Hon. CIT (A)
\nerred in passing the order in absence of reasonable opportunity of making the
\nsubmissions to the assessee in principles of natural justice and such order is in
\nviolation of principles of natural justice and liable to be quashed.\u201d
\n3. The assessee has also filed a petition for admission of additional ground,
\nvide its letter dated 27-03-2017 and taken a legal ground challenging validity of
\nassessment order passed by the AO u\/a 143(3) r.w.s. 153A of Income-tax Act,
\n1961 in absence of proper approval u\/s 153D of the Income-tax Act, 1961. The
\nadditional ground sought to be raised by the assessee is as under:-
\n\u201cSub: Application for admission of additional ground, in case of M\/s. Capacite
\nStructures Limited (PAN: AAACP4898A) for A.Y.2007-2008 (ITA No.
\n3874\/MUM\/2015) (‘C’ Bench).
\nRespected Sir,
\n1. The application is hereby made requesting for the admission of Additional
\nGround which is as under:
\n“1. On the given facts, circumstances and legal pronouncements, Ld. Assessing
\nofficer erred in framing the assessment order in the absence of valid approval under
\nthe provisions of Section 153D of The Income Tax Act, 1961 and such order passed
\nin the absence of valid approval is bad in law and liable to be annulled.”
\n2. Hon. Bench is hereby requested to admit the additional Ground and kindly
\nadjudicate the same.
\n3. Reliance in this regard is placed on judgment in case of National Thermal Power
\nCorporation by Hon. Apex Court and Ahmedabad Electricity by the Hon.
\nJurisdictional Bombay high Court.\u201d
\n4. The Ld.AR for the assessee, at the time of hearing, submitted that
\nadditional ground taken by the assessee challenging validity of assessment
\norder passed u\/s 143(3) r.w.s. 153A, in absence of valid approval under the
\nprovisions of section 153D of the Income-tax ACT, 1961 is a legal issue which
\nquestions the jurisdiction of the AO, passing assessment order. Therefore, the
\n4
\nPratibha Pipes & Structurals Ltd
\nsame may be admitted and decided the issue on merit. In this regard, the
\nassessee has relied upon the decision of Hon\u2019ble Supreme Court in the case of
\nNational Thermal Power Corporation Ltd vs CIT 229 ITR 383 (SC).
\n5. On the other hand, the Ld.DR strongly opposed additional ground filed
\nby the assessee and submitted that the assessee failed to make out a case by
\nplacing necessary facts before the AO at the time of assessment in connection
\nwith the additional ground taken challenging validity of assessment order.
\nTherefore, in absence of any facts as to availability of necessary material
\nbefore the AO in connection with additional ground, the same may not be
\nadmitted at a later stage merely for the reason that it is a legal ground which
\nquestions jurisdiction of the AO. In this regard, he relied upon the decision of
\nHon\u2019ble Bombay High Court in the case of Ultratech Cements Ltd vs CIT Income
\nTax Appeal No. 1060 of 2014 dated 18-04-2017.
\n6. We have heard both the parties and perused material available on
\nrecord. Admittedly, the assessee has taken legal ground challenging validity of
\nassessment order passed by the AO in light of valid approval u\/s 153D of the
\nAct, for the first time, before the Tribunal. We find that additional ground
\ntaken by the assessee is purely a legal issue which questions the authority of
\nthe AO passing assessment order in light of specific provisions provided u\/s
\n153D of the Act. Therefore, we are of the considered view that there is a merit
\n5
\nPratibha Pipes & Structurals Ltd
\nin additional ground filed by the assessee and hence, the same is admitted for
\nadjudication.
\n7. The brief facts of the case extracted from ITA No.3874\/Mum\/2015 for
\nAY 2007-08 are that a search and seizure action u\/s 132(1) of the Income-tax
\nAct, 1961 was carried out in the cases of Pratibha Industries group on 10-03-
\n2011 at the office premises as well as residential premises of the directors \/
\npartners of the group. Consequent upon the search, notices u\/s 153A of the
\nIncome-tax Act, 1961 were issued requiring assessee to furnish return of
\nincome within 30 days from the date of receipt of the notice. In response to
\nnotice, assessee filed return of income on 22-03-2012 declaring total income of
\nRs.5,42,22,858. Thereafter, the case has been selected for scrutiny and notices
\nu\/s 143(2) and 142(1) of the Act along with questionnaire was served on the
\nassessee. In response to notice, the authorised representative of the assessee
\nappeared from time to time and filed various details, as called for. In the
\nmeantime, on the basis of information received from sales-tax department, a
\nsurvey action u\/s 133A of the I.T. Act, 1961 was conducted on 15-01-2013 in
\nconnection with bogus purchase bills obtained by the assessee from hawala
\ndealers. During the course of survey operation, statement of Shri Ajit B
\nKulkarni, Managing Director of the company, Shri Ashok Kumar Wadhera,
\nExecutive director, Central Purchase department of the company and Shri
\n6
\nPratibha Pipes & Structurals Ltd
\nVipul S Shah, Chief Accounts Officer of the company was recorded u\/s 131 of
\nthe Income-tax Act, 1961. During the course of survey, certain loose papers
\nwere found including bills for purchases and other related documents, as per
\nwhich it was noticed that the assessee had not followed key and important
\nstandard operating procedures (SOPs) in respect of certain purchases made
\nfrom certain parties \/ suppliers. It was further observed that the assessee had
\ntaken accommodation bills \/ bogus purchases to the extent of Rs.12.86 crores
\nbetween financial years 2006-07 to 2010-11. In the statement recorded u\/s
\n131, the assessee has admitted failure of following standard operating
\nprocedure in respect of purchases, although it has followed SOPs in respect of
\nits purchase department. Further, Shri Ajit B Kulkarni, in his statement
\nrecorded during the course of survey also confirmed that there is no proper
\ndocumentation like delivery challans, transporters slips, weighment slip,
\nstamping at site for receipt of material, truck No. in respect of bills, etc. in
\nrespect of 22 vendors appearing in the list suspicious.
\n8. During the course of assessment proceedings, the AO, in order to verify
\ncorrectness of purchases claimed to have been made from certain parties,
\nissued a show cause notice and asked the assessee to file complete details
\nincluding necessary evidences of purchases from certain parties listed in list of
\nhawala dealers prepared by sales-tax department. In response, the assessee,
\n7
\nPratibha Pipes & Structurals Ltd
\nvide its letter dated 08-03-2013 filed a detailed submission which has been
\nreproduced at para 3 on pages 4 & 5 of AOs order. The main argument of the
\nassessee before the AO was that during the course of survey, no incriminating
\ndocument was found which suggested inflation of purchases by booking bogus
\n\/ accommodation bills, therefore, merely on the basis of information received
\nfrom sales-tax department and also for failure to follow standard operating
\nprocedures in respect of certain purchases, no adverse inference could be
\ndrawn so as to treat purchases from 22 parties as bogus, when assessee has
\nfiled complete details of purchases including purchase bills. Although there is
\na lapse in SOP followed in respect of certain purchases, which is due to
\ninadvertent mistakes of the persons, who was maintaining records in respect
\nof central purchase department, but otherwise, in respect of all other
\npurchases, no discrepancy was noticed either during survey operations or
\nduring assessment proceedings. Therefore, in absence of any finding as to
\nincorrectness in books of account and other details, no adverse inference could
\nbe drawn in respect of purchases from above parties.
\n9. The AO, after considering relevant submissions of the assessee and also
\ntaking note of information received from survey operations, held that it was
\nundisputed fact that in respect of certain parties, the assessee has not
\nfollowed standard operating procedures where as it was found that proper
\n8
\nPratibha Pipes & Structurals Ltd
\nSOPs were meticulously followed in case of transactions other than bogus bill
\ntransactions. The AO further held that it further went on to strengthen the
\ncase of the department that where SOPs are violated, the transactions must be
\nbogus. The AO further observed that when the assessee has meticulously
\nfollowed, SOPs in respect of its central purchase department, if the procedures
\nwere bypassed in respect of few purchases, it must give rise to a surmise and
\nsuspicion that there is a certain note for scrutiny which is why certain process
\nand certain persons were being bypassed. Therefore, he came to the
\nconclusion that in respect of purchases from 22 parties, certain very important
\nand key documentation which should also be there was found to be absent in
\ncase of the transactions where the purchases were involved. Therefore, he
\nwas of the opinion that in absence of any proper documentation and also
\nentries in the books of account in respect of purchases from those parties, it is
\ndifficult to accept the argument of the assessee that purchases from those
\nparties were genuine in nature. The AO further observed that another very
\ncrucial aspect also needed to be considered was that despite giving
\nopportunity to the assessee in this regard, the assessee failed to submit
\nconfirmations from those 22 parties, although sufficient time was given. The
\nassessee neither furnished confirmation nor produced the parties. Therefore,
\nwithout furnishing basic documents required for the purpose of verification of
\n9
\nPratibha Pipes & Structurals Ltd
\ntransactions, asking for a cross examination of the parties is an attempt made
\nto escape on technical grounds without substantiating the purchases from the
\nso-called parties. Accordingly, he made addition towards purchases from
\nthose 22 parties u\/s 69C of the Income-tax Act, 1961. The relevant
\nobservations of the AO are as under:-
\n6.3. It may be pertinent to mention here that it can be seen from the above reply,
\nmany issues were taken up by the assessee on merits, which in any ease would
\ncertainly be countered. However, it was contended that certified copies of the
\nstatements were not handed over by the survey officials to the assessee. In this
\nregardit is pertinent to note that subsequently thereafter as requested by the assessee
\nthe copies of the Statements and all jrnpounded material was duly handed over to
\nassessee and so acknowledged by assessee. It was further prayed that assessee should
\nbe given time to produce external confirmation of 22 parties regarding which adverse
\nfinding were there. With respect, to the same assessee was informed that he was free
\nto submit the said confirmations. Further it was also told to the assessee that it is free
\nto produce these parties before the undersigned in support of its contention.
\nHowever, at the same time the assessee\u2019s request to the undersigned in the reply to
\nissue summons to the 22 parties for cross examination was rejected, after recording a
\nfinding that onus is on the assessee to prove the genuineness of these transactions
\nwith the said parties.
\n6.4 On the appointed date assessee has filed another reply which has reiterated
\nmajority of the contentions of the earlier reply. The so called external confirmations
\nhave neither been submitted before me nor have the parties been produced so as to
\nundergo the evidentiary process of EXAMINATION, CROSS EXAMINATION
\nAND RE-EXAMINATION, despite opportunity given in this regard. Therefore, it
\ncan be clearly said that further opportunities remain to be given now to hear the
\nassessee\u2019s version and that the assessee\u2019s contention in the earlier reply dated
\n8.03.2013 in which due opportunity was requested to be given has dulv been acceded
\nto despite which the necessary evidence could not be produced. However, in the
\nreplv dated 18.3.2013 and as already referred to above almost entirely the reply was
\nrepetitious in nature except to say as under:
\n“We had requested your honour vide our earlier submission dated 8.3.2013 to
\nissue summons to various parries as appearing in survey report so as to enable
\nthe assesses for cross examination of the same.
\nYour honour has shifted the burden on assessee vide order sheet nioting
\ndated 12.3.2013 to prove the genuineness of transactions with the parties
\ncovered under survey operations to produce parties before Your honour and
\nsubmit external confirmation on or before 18.3.2013.
\nAfter verification of the facts, it is submitted that during the relevant year
\nthe transactions with the parties as appearing in the show cause notice dt.
\n8.3.2013 have been capitalized and have not been claimed as deduction from
\ntaxable income and hence no addition can be made to returned income.
\nThe rest of the submissions are on the same lines as before.\u201d
\n10
\nPratibha Pipes & Structurals Ltd
\n10. Aggrieved by the assessment order, assessee preferred appeal before
\nthe CIT(A). Before the CIT(A), the assessee has challenged addition made by
\nthe AO towards bogus purchases in absence of incriminating material found as
\na result of search in light of certain judicial precedents including the decision of
\nHon\u2019ble Bombay High Court in the case of CIT vs Murli Agro Products (2014) 49
\ntaxmann.com 172, in the assessment made u\/s 153A. On merits, the assessee
\nhas reiterated its submissions made before the AO and argued that purchases
\nfrom those parties were supported by necessary evidences, therefore, merely
\nfor the reason of not following standard operating procedures, no adverse
\ninference could be drawn to make addition u\/s 69C of the Act.
\n11. The Ld.CIT(A), after considering relevant submissions of the assessee and
\nalso by following certain judicial precedents, rejected legal ground taken by the
\nassessee challenging addition made towards bogus purchases in absence of
\nincriminating material in the assessments framed u\/s 153A by holding that
\nduring search and survey, certain incriminating materials were found and
\nseized as per which, the assessee is beneficiary of accommodation \/ bogus
\npurchase bills issued by hawala dealers and this fact was further supported by
\nthe report of sales-tax department where the parties admitted in their
\nstatements that they were involved in providing accommodation bills without
\nthere being any actual business activity. Insofar as addition made towards
\n11
\nPratibha Pipes & Structurals Ltd
\nbogus purchases, the Ld. CIT(A) observed that although the AO has brought
\nout various facts in respect of bogus purchases including failure to follow
\nstandard operating procedures in respect of alleged bogus purchases, the
\nassessee failed to counter the finding of facts recorded by the AO, except
\nstating that no addition could be made on third party statement, without
\nconfronting those statements to the assessee. The Ld.CIT(A) further observed
\nthat the question of cross examination and furnishing statement would arise
\nonly in case, where the assesseee has filed necessary basic details. Since the
\nassessee has failed to file basic details including confirmation from the party,
\nthere is no merit in seeking cross examination of the parties. Therefore, he
\nopined that there is no error in the reasons given by the AO to make addition
\ntowards bogus purchases claimed to have made from certain parties
\nmentioned in the list of hawala dealers prepared by sales-tax department.
\nAccordingly, he confirmed addition made by the AO and dismissed appeal filed
\nby the assessee. Aggrieved by the order of CIT(A), assessee is in appeal before
\nus.
\n12. The first issue that came up for our consideration from assessee
\nadditional ground is validity of assessment orders passed by the AO u\/s 143(3)
\nr.w.s. 143(3) in absence of valid prior approval of the Addl. CIT(A) u\/s 153D of
\nthe Income-tax Act, 1961.
\n12
\nPratibha Pipes & Structurals Ltd
\n13. The Ld.AR for the assessee submitted that the assessment order passed
\nby the AO u\/s 143(3) r.w.s. 153A is invalid and void ab initio, because the AO
\nhas passed assessment order without obtaining necessary prior approval from
\nthe Addl.CIT of concerned range, which is a requirement of the statute, as per
\nthe provisions of section 153D of the Act. The Ld.AR further submitted that
\nwhen there is no prior approval from the authority, who is superior to the AO,
\nwho passed assessment order, as per the provisions of section 153D, then the
\nwhole proceedings is invalid void ab initio and hence, the AO did not have any
\njurisdiction to make assessment under the provisions of the Act. The Ld.AR
\nfurther submitted that although the AO stated to have taken approval from the
\nAddl.CIT, Central Range-4, Mumbai before completion of assessment, but,
\nthere was no evidence available in the file for having taken approval u\/s 153D
\nof the Act, which is evident from the fact that when the assessee has filed an
\napplication under the provisions of RTI Act, 2005, the department has
\nfurnished reply and categorically stated that neither the copy of a request
\nletter filed by the AO nor copy of approval granted u\/s 153D of the I.T.ACT,
\n1961 was found in the folder. However, in the 153D approval maintained in
\nthe office of Addl CIT, Central Range-4, the approval granted u\/s 153D of the
\nAct, in other group caseas of M\/s Capacite Structure Ltd (formerly known as
\nPratibha Pipes & Structurals Ltd) were found, but the approval letter in the
\n13
\nPratibha Pipes & Structurals Ltd
\ncase of M\/s Capacite Structure Ltd could not be located. Since, the
\ndepartment itself, has admitted the fact that there was no proof of taking
\napproval u\/s 153D, even though the AO has mentioned in his assessment order
\nthat prior approval from the competent authority has been taken before
\npassing the assessment order would not validate the assessment order passed
\nby the AO, unless the approval taken u\/s 153D was indicated to the assessee.
\nThe Ld.AR further submitted that it is an admitted fact that the department
\nhas expressed its inability to furnish copy of approval letter issued by the
\ncompetent authority u\/s 153D of the Act. Therefore, even though now they
\nstated that approval u\/s 153D has been issued in all group cases cannot cure
\nnon availability of approval letter in the case of the assessee. Therefore, in
\nabsence of proper approval u\/s 153D of the Act, the assessment order passed
\nby the AO u\/s 143(3) r.w.s. 153A is void ab initio and liable to be quashed. In
\nthis regard, he relied upon certain judicial precedents including the decision of
\nITAT, Mumbai Bench \u201cH\u201d in the case of Hiklass Moving Picture Ltd vs ACIT in
\nITA Nos. 936 to 931\/Mum\/2013 dated 30-09-2016. The assessee also relied
\nupon the decision of ITAT, Pune Bench in the case of Ali Ghulamali Somji vs ITO
\nin ITA No.453\/PN\/2010 dated 30-03-2012.
\n14. The Ld.DR, on the other hand, strongly supporting the order of Ld.CIT(A),
\nsubmitted that there is no merit in the arguments on the legal ground taken by
\n14
\nPratibha Pipes & Structurals Ltd
\nthe assessee challenging validity of assessment order passed u\/s 153A r.w.s.
\n143(3), because the AO has taken necessary approval u\/s 153D which is clearly
\nevident from the fact that the AO has categorically recorded facts regarding
\napproval taken u\/s 153D on the last page of the assessment order, vide para 7,
\nas per which, the Addl.CIT, Central Range-4 has granted approval u\/s 153D vide
\nhis letter dated 25-03-2013. The Ld.DR further submitted that there is serious
\ndoubt in the intend of the assessee in taking legal ground, for the first time
\nbefore the Tribunal, that too, after obtaining reply under the RTI Act. The
\nassessee has filed additional ground when the department expressed its
\ninability to furnish copy of approval letter to take advantage of non availability
\nof the letter in the folders. Otherwise, the assessee has not disputed the fact
\nof approval by the AO before passing the assessment order, either by filing
\nnecessary petition before the AO or before the first appellate authority by
\ntaking a specific ground challenging validity of assessment order. The Ld.DR
\nfurther submitted that although the Act, mandates obtaining prior approval
\nfrom the authority under the provisions of section 153D, but, such
\nrequirement is only an administrative requirement which has to be complied
\nwith by the AO before passing assessment order. In this case, the AO has
\ncomplied with the requirement of law which is evident from the fact that he
\nhad obtained prior approval from the competent authority us 153D of the Act.
\n15
\nPratibha Pipes & Structurals Ltd
\n15. The Ld.DR referring to affidavit filed by Shri Abhijit Pathankar (DR), ITAT,
\nG-Bench, Mumbai, who was the then Additional CIT, submitted that the officer,
\nwho was holding the charge of Range Addl.CIT at the time of passing
\nassessment order, categorically stated in his affidavit that he had issued
\nnecessary approval u\/s 153D, vide letter No.Addl.CIT\/CR-4\/Approvl-
\n153D\/2012-13 dated 25-03-2013. The Ld.DR further submitted that Shri Milind
\nRajguru, Joint Commissioner of Income-tax, who was the then AO, who passed
\nthe assessment order u\/s 143(3) r.w.s. 153A has also filed an affidavit stating
\nthat he had passed assessment order after obtaining necessary approval from
\nthe Addl.CIT, Cent.Range-4, Mumbai vide letter dated 25-03-2013. If, we go
\nthrough the affidavits filed by two senior officers, who were part of
\nproceedings in the case of the assessee, have categorically stated that the
\napproval required to be obtained under the Act, has been obtained before
\npassing the assessment order. He, further submitted that mere absence of
\ndocument from case records cannot undo a statutory action which has been
\ncompleted after following due procedure of law. He, further stated that as
\nlong as both officers, who were in charge of the assessment in assessee case,
\nfound that the assessee was always avoiding taking proper statutory remedies.
\nThe assessee had enough time to opt for option available to it, but when both
\nofficers were not in charge, on account of transfers to other jurisdiction, the
\n16
\nPratibha Pipes & Structurals Ltd
\nassessee has taken legal ground to derive undue benefit, therefore, the whole
\nissue needs to be appreciated in the perspective of issue before the lower
\nauthorities. The Ld.DR further submitted that when the approval required to
\nbe taken under the provisions of the Act, has been taken which is supported by
\nthe secondary evidence in form of affidavit of concerned officers, there is no
\nreason for the assessee to argue that no approval has been taken. Therefore,
\nhe submitted that the additional ground taken by the assessee does not have
\nany merit and needs to be dismissed.
\n16. We have heard both the parties, perused the materials available on
\nrecord and gone through the orders of authorities below. There is no doubt
\nwith regard to the fact that as per provisions of section 153D, the AO needs to
\ntake prior approval from the Addl.Commissioner of the range in charge before
\npassing any assessment order u\/s 143(3) r.w.s. 153A of the Income-tax Act,
\n1961. It is also not in dispute that the AO, in his assessment order at para 7
\nhad categorically stated that the mandatory requirement of approval u\/s 153D
\nof the Income-tax Act, 1961 has been taken from the Addl.CIT, Central Range-
\n4, Mumbai vide letter No.Addl.CIT\/CR-4\/Approvl-153D\/2012-13 dated 25-03-
\n2013. It is also not in dispute that the assessee has not raised any objection,
\nwhatsoever, with regard to the issue of approval u\/s 153D either before the
\nAO or before the first appellate authority. The assessee has taken the legal
\n17
\nPratibha Pipes & Structurals Ltd
\nground for the first time before the Tribunal by filing additional ground of
\nappeal. Therefore, the whole issue needs to be apprised in the light of above
\nfacts and also the conduct of the assessee. Admittedly, the department, in
\nreply to RTI application clarified that neither copy of approval request letter
\nfiled by the AO to the Addl. Commissioner, nor copy of approval granted u\/s
\n153D of the Act, was found in the assessment order folder. However, it was
\nfurther stated that in the 153D approval folder maintained in the office of
\nAddl.CIT, Range-4, the approval granted in other group cases were traced. The
\nassessee claims that mere mentioning of having been taken approval u\/s 153D
\nin the assessment order is not sufficient and what is required to be seen is
\nwhether the department is able to provide copy of approval letter granted by
\nthe Addl.CIT, or not. Since the department has categorically stated that
\napproval granted u\/s 153D of the Act is not available in the assessment folder,
\nobviously, benefit of doubt goes in favour of the assessee that no such
\napproval has been taken by the AO u\/s 153D before passing order u\/s 143(3)
\nr.w.s. 153A of the I.T. Act, 1961.
\n17. In the above factual background, if we examine the claim of the assessee
\nby way of additional ground, we find that there is a serious suspicion raises
\nabout the conduct of the assessee in taking additional ground challenging the
\nissue of approval u\/s 153D of the I.T. Act, 1961, for the first time, before the
\n18
\nPratibha Pipes & Structurals Ltd
\nTribunal. The assessee never disputed this issue before the lower authorities.
\nThe assessee has taken this issue for the first time before the Tribunal after
\nascertaining the fact in connection with its RTI application that no such
\napproval was available in the assessment folder. When the assessee has not
\nraised the issue before the CIT(A), then there is a serious doubt arise in the
\nmind about the intend of the assessee to take a legal ground before the
\nTribunal. In this factual background, if we examine the contents of the
\napproval mentioned by the AO in the assessment order coupled with affidavits
\nfiled by two senior most officers, who were in charge of the assessment
\nproceedings, we find that both officers have stated in their affidavits about
\nrequirement of law under the provisions of section 153D of the Income-tax
\nAct, 1961. The then AO, Shri Milind Rajguru, Joint Commissioner of Income-tax
\n(Retd) had filed an affidavit and stated that mandatory requirement of
\napproval u\/s 153D had been obtained. Further, Shri Abhijit Pathankar, the
\nCIT(DR), has also filed an affidavit and stated that he had granted approval
\nrequired to be given u\/s 153D vide his letter No.Addl.CIT\/CR-4\/Approvl-
\n153D\/2012-13 dated 25-03-2013. Although, affidavit is not primary evidence
\nwhich cannot be accepted in absence of circumstantial evidences, but in this
\ncase, the circumstantial evidence available in the assessment record supports
\nthe contents of affidavits filed by both officers. Therefore, the affidavits filed
\n19
\nPratibha Pipes & Structurals Ltd
\nby the officers cannot be ignored, as not having any evidentiary value. The
\ncontents of affidavits filed by the officers coupled with circumstantial
\nevidences available in the assessment folders clearly establish the fact of
\nobtaining necessary approval u\/s 153D of the I.T. Act. Though, copy of
\napproval letter is not available in the assessment record, but the contents of
\napproval letter issued by the competent authority has been reproduced in
\nverbatim in the assessment order at para 7. Further, the approval granted in
\nother group cases is very much available in the assessment folder. Therefore, it
\ncannot be said that no approval had been taken. Further, the approval u\/s
\n153D is an administrative procedure which requires to be complied with by the
\nofficers, who is discharging the assessment functions. The administration
\naction of the department is not very much relevant for the assessee to justify
\nits case, on merits. Therefore, when assessee goes to question the
\nadministrative procedure, rather contending its case on merits, that too, after
\na lapse of 4 to 5 years, then obviously, a doubt arises about intend of the
\nassessee in taking this ground and such an attempt is derail the issue on merits
\nand to escape on technical ground. Therefore, we are of the considered view
\nthat there is no merit in the additional ground taken by the assessee
\nchallenging validity of assessment order passed by the AO u\/s 143(3) r.w.s.
\n153A of the Income-tax Act, 1961. Although, the assessee has relied upon
\n20
\nPratibha Pipes & Structurals Ltd
\ncertain judicial precedents, we find that those case laws were rendered under
\ndifferent set of facts, where the assessee had taken the ground challenging
\nvalidity of the assessment before the CIT(A) and also fact that there was no
\nspecific observation in the assessment order for taking approval required to be
\ntaken u\/s 153D of the Income-tax Act, 1961. In this case, the AO has
\ncategorically recorded at para 7 of his assessment order in respect of approval
\ntaken u\/s 153D and such reference has been further strengthened by the
\naffidavits of two officer, who were part of assessment proceedings. Therefore,
\nthe case laws relied upon by the assessee cannot be considered as applicable
\nto the facts of assessee case.
\n18. In this view of the matter and considering facts and circumstances of the
\ncase, we are of the considered view that there is no merit in the additional
\nground taken by the assessee challenging validity of assessment order passed
\nu\/s 143(3) r.w.s. 153A of the I.T. Act, 1961 in light of provisions of section 153D
\nof the I.T.ACT, 1961. Hence, we reject additional ground taken by the
\nassessee.
\n19. The next issue that came up for our consideration is addition towards
\nbogus purchases from certain parties. The facts borne out from the records
\nare that when the assessment proceedings u\/s 143(3) r.w.s. 153A was in
\nprogress, there was a survey action u\/s 133A of the Income-tax Act, 1961 at
\n21
\nPratibha Pipes & Structurals Ltd
\nthe office premises of the assessee by the DDIT(Inv), Unit I(2), Mumbai. The
\nsaid survey was conducted on the basis of reports that assessee was taking
\naccommodation entries from hawala dealers and consequently booking bogus
\npurchases to inflate its expenditure and suppress profits. During the course of
\nsurvey, certain loose papers, bills for purchases and other related documents
\nwere found, as per which, it was found that the assessee had not followed key
\nand important standard operating procedures in respect of certain purchases
\nmade from certain parties \/ suppliers. Otherwise, the assessee has followed
\nstandard operating procedures, as set out, in respect of all other purchases.
\nWhen these discrepancies were confronted to Shri Ajit B Kulkarni, Managing
\nDirector, Shri Ashok Kumar Wadhera, Executive Director and Shri Vipul S Shah,
\nChief Accounts Officer, they have admitted in their statements u\/s 131 that the
\ncompany has not followed standard operating procedures in respect of certain
\npurchases from certain parties. During the course of survey, it was further
\nnoticed that where the assessee is not following standard operating
\nprocedures in respect of purchases from certain parties, the same was
\nmatching with the list of suspicious \/ hawala dealers prepared by the sales-tax
\ndepartment. On the basis of information gathered during the course of survey,
\ncoupled with report of sales-tax department, it was noticed that the assessee
\nhad taken accommodation bills \/ bogus purchase to the extent of Rs.13.86
\n22
\nPratibha Pipes & Structurals Ltd
\ncrores in FYs 2006-07 to 2010-11. During the course of assessment
\nproceedings, when the AO called upon the assessee to file complete details of
\npurchases from the so-called hawala dealers, the assessee furnished certain
\ndetails including purchase bills, but could not file confirmations from the
\nparties. When the AO called upon the assessee to produce the parties in
\nperson, the assessee could not do so. Further, on the basis of information filed
\nby the assessee, the AO observed that in respect of purchases from 22 parties,
\ncertain very important and key documentation chart, always been there was
\nfound to be missing in case of the transactions, where the bogus purchases
\nwere involved. Therefore, he came to the conclusion that purchases from 22
\nparties were bogus in nature and hence, made addition u\/s 69C of the Act,
\ntowards total purchases from those parties.
\n20. The Ld.AR for the assessee submitted that the Ld.CIT(A) was erred in
\nconfirming addition made by the AO towards bogus purchases without
\nappreciating the fact that mere deficiencies in SOPs followed by the assessee
\nin respect of certain parties, is not a ground to come to the conclusion that
\npurchases from the above parties are bogus, when assessee has furnished
\ndetails including purchase bills from the parties. The assessee, at the best,
\ncould file whatever information available with it. But it could not be expected
\nfrom the assessee to produce parties in person when the parties were not
\n23
\nPratibha Pipes & Structurals Ltd
\nimmediately available at the time of proceedings. The Ld.AR further submitted
\nthat except stating that SOP was not followed in respect of certain purchases,
\nno other adverse comments were made in respect of purchases from above
\nparties. No adverse comments were made in respect of sales declared by the
\nassessee. In absence of any finding as to incorrectness in books of account or
\nsales made outside the books, purchases from certain parties could not be
\ndisallowed merely for the reason that the assessee could not file confirmations
\nfrom those parties. The Ld.AR further submitted that if at all the purchases are
\nconsidered to be bogus in nature, and then a reasonable percentage of profit
\nmay be estimated like other cases, where the Tribunal is consistently
\nestimating profit on alleged bogus purchases.
\n21. The Ld.DR, on the other hand, strongly supporting the order of the
\nLd.CIT(A) submitted that the lower authorities have brought out clear facts to
\nthe effect that the assessee has failed to file confirmations from the parties
\nand produce the parties in person when the AO has asked the assessee to do
\nso. Further, in respect of evidences filed by the assessee, lot of discrepancies
\nwere noticed including lack of identification marks on purchase bills, absence
\nof stamp, absence of proper entries by the store keeper of the goods receipt
\nnote, absence of stamp and signature and date of delivery challan as
\nacknowledgement of receipt of material by the store keeper, absence of
\n24
\nPratibha Pipes & Structurals Ltd
\ntransportation receipts, vehicle No., etc. When all these evidences were
\nmissing, the AO came to the conclusion that purchases from those parties
\nwere bogus which is further supported by investigation carried out during the
\ncourse of survey, where they have admitted lapse in SOPs followed in respect
\nof certain purchases. Accordingly, there is no error in the findings recorded by
\nthe lower authorities while making addition towards bogus purchases and,
\ntherefore, their orders should be upheld.
\n22. We have heard both the parties, perused material available on record
\nand gone through the orders of authorities below. The addition made by the
\nAO is based on report of sales-tax department which is further supported by
\nthe survey conducted at the business premises of the assessee, where it was
\nnoticed that in respect of purchases from 22 parties, the assessee had not
\nfollowed SOPs, whereas in respect of general purchases, SOP has been
\nmeticulously followed. The AO reached to the conclusion that purchases from
\n22 parties are bogus in nature when the assessee has failed to file
\nconfirmations from those parties and also failed to produce the parties in
\nperson, when specifically asked to do so. The AO has brought out number of
\ndiscrepancies in his assessment order in respect of purchases from the above
\nparties. Although the assessee has filed certain basic evidence including
\npurchase bills from those parties, as per the AO, in respect of purchases from
\n25
\nPratibha Pipes & Structurals Ltd
\nthose parties, there is lack of identification marks on purchase bills, absence of
\nstamp in respect of documents evidencing the receipt of material, absence of
\nproper entries by the store keeper of the goods receipt note in the SAP system
\nand absence of stamp and signature in delivery challan. The AO further
\nbrought out more fact to the effect that the assessee is meticulously following
\nstandard operating procedure in respect of general purchases except purchase
\nfrom 22 parties, where these lacunae were noticed. The assessee, except
\nstating that no cross examination was allowed to verify the statement of third
\nparties, but no other evidence has been filed to justify purchases from those
\nparties including confirmation from the parties. Therefore, the AO came to the
\nconclusion that purchases from 22 parties were bogus in nature which is not
\nsupported by necessary evidences.
\n23. It is an admitted fact that during the course of survey u\/s 133A, certain
\nloose papers, bills and other relevant documents were found, as per which, the
\nassessee has taken accommodation \/ bogus purchase bills to the extent of
\n13.86 crores for FYs 2006-07 to 2010-11. The said quantification has been
\nmade on the basis of discrepancies noticed in respect of purchase bills from
\nthose parties in comparison to the standard operating procedure followed by
\nthe assessee in respect of central purchase department. When these
\ndiscrepancies were confronted to the managing director of the assessee, Shri
\n26
\nPratibha Pipes & Structurals Ltd
\nAjit B Kulkarni, in his statement recorded u\/s 131 he had categorically admitted
\nthat no standard operating procedure were followed in respect of purchases
\nfrom 22 parties. This fact has been confirmed by the Executive Director of the
\ncompany, Shri Ashok Kumar Wadhera and shri Vipin S Shah, Chief Accounts
\nOfficer of the company. Further, during the course of assessment proceedings,
\nthe AO has carried out enquiries to ascertain correctness of purchases from
\nthe above parties in light of facts brought out by the survey party and also in
\nlight of report of sales-tax department. Enquiries conducted by the AO prove
\nthe fact that purchases from the above parties are bogus which are not
\nsupported by necessary evidence. This is because when the AO has called
\nupon the assessee to file confirmation from the parties, the assessee could not
\nfile confirmations. The assessee also could not produce the parties in person
\nfor verification when the AO has specifically asked the assessee to do so.
\nTherefore, we are of the considered view that the AO has not only made
\naddition on the basis of third party information without confronting those
\nstatements to the assessee, but carried out further verification which proved
\nfact that those purchases are bogus in nature. In fact, the facts brought out by
\nthe AO during assessment Proceedings clearly establishes the fact of accepting
\nbogus purchase bills from hawala dealers. Accordingly, we reject the
\n27
\nPratibha Pipes & Structurals Ltd
\narguments of the assessee that purchases from above parties are genuine,
\nwhich are supported by necessary evidences.
\n24. Having said so, let us examine what is the amount of addition needs to
\nbe made when the purchases are proved to be bogus which are not supported
\nby necessary evidence. The assessee claims that in case of bogus purchases,
\nonly profit element embedded in such purchases needs to be taxed, but not
\nwhole bogus purchases, because the AO has not categorically proved the fact
\nthat purchases are in fact bogus. The assessee has relied upon various judicial
\nprecedents including the decision of ITAT, Mumbai Benches in a number of
\ncases. We find that the ITAT, Mumbai Benches, in a number of cases have
\ntaken a consistent view that where purchases are bogus, only profit element
\nembedded in those purchases needs to be taxed, but, not whole purchases
\nfrom so-called hawala dealers. The Tribunal further considering facts of each
\ncase has directed the AO to estimate profit of 10 to 15% depending nature of
\ntrade. The Tribunal, while arriving at a conclusion that only profit element in
\nbogus purchases needs to be taxed had recorded categorical finding that the
\nAO has done incomplete enquiries without reaching to a conclusion that
\npurchases from those parties were, in fact, bogus. In many of the cases, the
\nAO has issued notices u\/s 133(6), but said notices were returned unanswered
\nby the postal authorities with the remark, \u2018left\u2019 or \u2018unknown\u2019. When the
\n28
\nPratibha Pipes & Structurals Ltd
\nnotices were returned unanswered, the AO ought to have carried out further
\nenquiries to ascertain the identity of the parties and genuineness of
\ntransactions between them, but the AO did not do so. Under these facts, the
\nTribunal reached to a conclusion that only profit element embedded in those
\npurchases needs to be taxed.
\n25. In this case, on perusal of facts available on record, we find that the AO
\nhas not made addition only on the basis of report of sales-tax department. In
\nfact, the AO has conducted all possible enquiries during the course of
\nassessment proceedings, as per which, he had directed the assessee to file
\nconfirmations from the parties and also to produce the parties for
\nexamination. But, the assessee could neither file confirmations, nor produce
\nthe parties in person. Further, the AO has brought out number of
\ndiscrepancies in books of account of the assessee including purchases from 22
\nparties, as per which, the assessee has followed SOPs in respect of all
\npurchases, where each identification has been made including entry of goods,
\nwhereas in respect of purchases from 22 parties, no such identification has
\nbeen made. This fact has been admitted by the assessee and its directors.
\nTherefore, we are of the considered view that under these facts, the ratio laid
\ndown by the Hon\u2019ble Supreme Court in the case of NK Proteins Ltd vs DCIT
\n(2017) 292 CTR 354 (SC) is squarely applicable to the facts of assessee case,
\n29
\nPratibha Pipes & Structurals Ltd
\nwhere the Hon\u2019ble Supreme Court dismissed appeal filed by the assessee and
\nconfirmed the findings of Hon\u2019ble Gujarat High Court in respect of bogus
\npurchases, where the Hon\u2019ble Gujarat High Court, after analysing necessary
\nfacts at para 6 of the order, held that once the Tribunal having come to a
\ncategorical finding that the purchases from certain parties are bogus, it was
\nnot incumbent on it to restrict the disallowance to the extent of 25% of such
\npurchases. The relevant findings of the Court are as under:-
\n\u201c6. The Tribunal in the case of Vijay Proteins Ltd. (supra) has observed that it
\nwould be just and proper to direct the Assessing Officer to restrict the addition in
\nrespect of the undisclosed income relating to the purchases to 25% of the total
\npurchases. The said decision was confirmed by this Court as well. On
\nconsideration of the matter, we find that the facts of the present case are identical
\nto those of M\/s. Indian Woollen Carpet Factory (supra) or Vijay Proteins Ltd.
\n(supra) In the present case the Tribunal has categorically observed that the
\nassessee had shown bogus purchases amounting to Rs. 2,92,93,2887- and taxing
\nonly 25% of these bogus claim goes against the principles of Sections 68 and 69C
\nof the Income Tax Act. The entire purchases shown on the basis of fictitious
\ninvoices have been debited in the trading account since the transaction has been
\nfound to be bogus. The Tribunal having once come to a categorical finding that
\nthe amount of Rs. 2,92,93,2887- represented alleged purchases from bogus
\nsuppliers it was not incumbent on it to restrict the disallowance to only Rs.
\n73,23,3227-.
\n6.1 In the case of NR Paper & Boards Ltd. (supra), this Court has discussed the
\nissue as to whether after making of block assessment, regular assessment is barred
\nor prohibited by law. This court has held that there would be no overlapping in the
\nnature of assessment made under this Chapter of undisclosed income and the
\nregular assessment made u\/s 143(3). However, if the said decision is read in
\ncontext of questions raised in the present appeal, it cannot be read as having held
\nthat even if the material found during the course of search expose the falsity of the
\nentries made in the regular books of accounts, the consequent concealed income
\ncannot be assessed as undisclosed income in the block assessment under Chapter
\nXIV-B. The said decision shall therefore not be applicable on the facts and
\ncircumstances of the present case. The Tribunal is justified in holding the same
\nagainst the assessee and in favour of revenue.\u201d
\n26. In this view of the matter and respectfully following the ratio laid down
\nby Hon\u2019ble Supreme Court in the case of N K Proteins Ltd(Supra), we are of the
\n30
\nPratibha Pipes & Structurals Ltd
\nconsidered view that the AO was right in making 100% addition towards bogus
\npurchases u\/s 69C of the Income-tax Act, 1961. The Ld.CIT(A), after considering
\nrelevant facts, has rightly confirmed the findings of Ld.AO. We do not find any
\nerror in the order of the Ld.CIT(A) and hence, we are inclined to uphold the
\norder of the Ld.CIT(A) and dismiss the appeal filed by the assessee.
\n27. The assessee has taken a specific ground challenging the action of the
\nLd.CIT(A) for not providing reasonable opportunity of hearing to the assessee
\nin violation of principles of natural justice. At the time of hearing, the Ld. AR
\nfor the assessee submitted that he did not want to press ground 3 and hence,
\nthe same has been dismissed, as not pressed.
\n28. In the result, appeal filed by the assessee is dismissed.
\nITAs No.3875, 3876\/Mum\/2015 & 7120\/Mum\/2016
\n28. The facts and issues involved in these three appeals are identical to the
\nfacts and issues which we have already considered in ITA No.3874\/Mum\/2015.
\nThe reasons give by us in preceding paragraphs in ITA No.3874\/Mum\/2015
\nshall, mutatis mutandis apply to these appeals also. Therefore, for details
\nreasons given by us in preceding paragraphs, we dismiss these appeals filed by
\nthe assessee.
\n29. In the result, all the appeals filed by the assessee are dismissed.
\n31
\nPratibha Pipes & Structurals Ltd
\nCOs No.100 to 102\/Mum\/2017 & CO No.254\/Mum\/2018
\n30. The revenue has filed these cross objections against additional ground
\nfiled by the assessee challenging validity of assessment order passed by the AO
\nu\/s 143(3) r.w.s. 153A, in absence of prior approval of competent authority
\nunder the provisions of section 153D of the Income-tax Act, 1961. Since, we
\nhave already decided additional ground taken by the assessee challenging
\nvalidity of assessment proceedings in absence of valid approval u\/s 153D of the
\nAct, in favour of the revenue and against the assessee, cross objections filed by
\nthe revenue become infructuous and not maintainable; hence, cross objections
\nfiled by the revenue are dismissed, as infructuous.
\n31. As a result, all appeals filed by the assessee and cross objections filed by
\nthe revenue are dismissed.
\nOrder pronounced in the open court on 10-04-2019.
\nSd\/- sd\/-
\n(Ravish Sood) (G Manjunatha)
\nJUDICIAL MEMBER ACCOUNTANT MEMBER
\nMumbai, Dt : 10th April, 2019
\nPk\/-
\n32
\nPratibha Pipes & Structurals Ltd
\nCopy to :
\n1. Appellant
\n2. Respondent
\n3. CIT(A)
\n4. CIT
\n5. DR
\n\/True copy\/ By order
\nAsstt. Registrar, ITAT, Mumbai<\/p>\n","protected":false},"excerpt":{"rendered":"
When assessee goes to question the administrative procedure, rather contending its case on merits, that too, after a lapse of 4 to 5 years, then obviously, a doubt arises about intend of the assessee in taking this ground and such an attempt is derail the issue on merits and to escape on technical ground. Therefore, we are of the considered view that there is no merit in the additional ground taken by the assessee challenging validity of assessment order passed by the AO u\/s 143(3) r.w.s. 153A of the Income-tax Act, 1961.<\/p>\n